MUMBAI:The government's fiscal burden in
providing a safety net to the elderly could rise to as much as 4.1% of the GDP
by 2030 from 2.2% at present, a report by global analytical company Crisil has
said. Currently, the central government spends 3-3.4% of GDP on education and
just over 1% of GDP on medical and public health, water supply and sanitation.
According to the report, India's population
aged 60 years and above will triple to 300 million by 2050. The government in
2004 introduced a formula for contribution under the new pension scheme for its
employees. This is expected to trim its pension burden to 0.7% of GDP by 2050
from 2.2% of GDP at present.
However, the report says the government will
find it challenging to provide pension or support to anybody from the private
sector. At present, 93% of the employees are in the informal sector.
Since the private sector lacks a pension
programme, government will have to largely bear the burden of providing a
safety net to those over 60 years of age. In the best case scenario, the
government's fiscal burden from pension bill will rise to 3.4% of GDP by 2030.
This will happen in case the Centre provides pension support to only 30% of the
elderly who are needy, in addition to those retiring from government jobs and
coverage in private sector expands from 8% to 70%.
If these conditions are not met, the
government's pension bill could rise to 4.1% of GDP by 2030. This scenario
assumes that the private sector coverage will stay at the current level of 8%
and the government will formulate a pension scheme to support the entire ageing
population.
In the overall household savings, bank
deposits account for nearly 5% while provident and pension funds make up 15%.
The new pension scheme launched in 2010 has
proved a nonstarter due to lack of awareness and low incentives to
distributors. One of the suggestions to encourage investments into the new pension
system is to move it from exempt exempt tax (EET) structure to exempt or EEE,
where the maturity amount is not taxed.
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